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No jolly holiday yet for retailers
Wal-Mart disappoints; clothing chains see mixed results but luxury remains a bright spot.
December 2, 2004: 4:04 PM EST
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - Wal-Mart's November sales woes may be a heavy burden to bear for discounters in particular, but the rest of the retail sector managed to pull out some positive surprises during the important holiday shopping month.

Wal-Mart's decision to offer lean discounts over the three-day post-Thanksgiving shopping period backfired badly. Additionally, industry watchers said consumers were also put off by Wal-Mart's limited product selection, especially in hot holiday categories such as electronics, computers, apparel and athletic footwear.

The disparity between the value merchants and the specialty and high-end stores continued last month with teen apparel sellers and the luxury group delivering stellar performances.

Wal-Mart Stores Inc. on Thursday reported November sales at its stores open at least a year were at the low-end of its earlier guidance for the month and projected December same-store sales to be up, in the 1 to 3 percent range.

Wal-Mart Stores (Research), the world's largest retailer, said same-store sales rose 0.7 percent for the four-week period ended Nov. 26, matching its reduced forecasts for the period.

Wal-Mart had expected November sales growth of between 2 to 4 percent growth but was forced to sharply reduce that forecast after Black Friday sales came in much weaker than expected. Total sales including new stores rose 8.7 percent to $23.5 billion from $21.6 billion a year earlier. Shares of Wal-Mart were trading up 28 cents to $53.10 at noon.

"High energy prices coupled with uncertainty regarding future economic growth and the job situation appear to be disproportionately impacting low-end consumers and hurting sales," said Ken Perkins, analyst with Retail Metrics.

Added Perkins, "The Conference Board's November consumer confidence Index fell in November for the fourth consecutive month and was noticeably weak among lower income consumers."

"Wal-Mart's much slower rate of sales growth in November clearly shows this is a matured global business," said Richard Hastings, retail sector analyst with Bernard Sand. "As supermarket goods continue to increase as a percentage of sales -- and this includes consumables and perishables sold in big volume at Sam's Club -- we will expect to see a persistently slower rate of top line growth."

By contrast, sales at Target Corp. (Research), the No. 2 discounter after Wal-Mart rose 3.2 percent.

Teen clothier American Eagle Outfitters (Research) posted same-store sales at its namesakes stores that surged 24.3 percent, cruising past analysts' estimates for a 16.9 percent gain. Young women's apparel retailer Bebe (Research) logged a 23.3 percent jump in its sales, while Aeropostale (Research) said sales rose 4.1 percent last month.

Abercrombie & Fitch (Research) reported a 2 percent gain in sales.

However, there were a few laggards in the space. Among them, Hot Topic (Research), the seller of goth-type clothing for teens, saw its sales plunge 8 percent and also slashed its fourth-quarter profit outlook.

"With November comparable down 8 percent and the company lowering guidance once again, Hot Topic continues to be on the wrong side of the fashion trend with no near term catalysts in sight," JP Morgan retail analyst Brian Tunick wrote in a note to clients Thursday. "Hot Topic will obviously need to take deep markdowns in order to clear unwanted holiday product."

Limited Brands (Research), parent of Victoria Secret, Express and Bath & Body Works chains, posted a sales decline of 5 percent in November, led by a 22 percent decline in Express' same-store sales.

Gap Inc (Research), the No. 1 specialty apparel chain in the United States, posted a four percent decline with its international division posting the worst performance, followed negative results for its Banana Republic unit and Old Navy. Gap's namesakes stores posted a mediocre 1 percent gain.

Other casualties included Pier 1 Imports (Research), the home furnishing and accessories retailer that posted a steeper-than-expected sales decline of 9.1 percent.

While low and middle-income consumers have cut back on purchases, high-end consumers have been less impacted by higher energy prices. Luxury retailers Nordstrom (Research)'s sales rose 3.1 percent and sales at Neiman Marcus (Research) climbed 8.4 percent.

Among the department store chains, those that offered the juicy discounts scored big with shoppers. The two-month holiday combined sales period of November and December can account for over half of annual sales and profit for some merchants.

J.C. Penney (Research) led the winners, logging a 12 percent rise in same-store sales. Sears (Research) saw a more modest rise of 2.8 percent.

"Sears did a superb job on seasonal holiday promotions in circulars and TV ads and enjoyed a strong November. Sears comparable sales gains compares favorably to last year when November 2003 same-store sales were down 3.6 percent," said Bernard Sands' Richard Hastings,

"There is surely some evidence of pressure on spending capacity among lower income households based upon the weaker sales growth at BJ's Wholesale Club, Dollar General, and Wal-Mart," he added. "But continued strength in sales at Abercrombie & Fitch and J.C. Penney suggest fashion shoppers are responding well to the right merchandising and promotional advertising."

Separately, consumer electronics behemoth Best Buy (Research) reported third-quarter same-store sales rose 3.2 percent, spurred by sales of digital televisions, MP3 players, digital cameras and notebook computers. The company does not break out monthly sales results.  Top of page

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